ARTICLE IN PRESS

Int. J. Production Economics 107 (2007) 260–273

www.elsevier.com/locate/ijpe

The lack of maintenance and not maintenance which costs: A

model to describe and quantify the impact of vibration-based
maintenance on company’s business
Basim Al-Najjar
Department of Terotechnology, Växjö University, Lückligs plats 1, 351 95 Växjö, Sweden
Received 30 August 2005; accepted 20 September 2006
Available online 17 November 2006

Abstract

Maintenance is usually considered as a cost-centre or necessary evil, because (according to this aspect) it costs the
company unnecessarily big budget, while it should be treated as a profit-generating centre. The problem addressed in this
paper is that if maintenance is a profit contributor how does maintenance technical impact transfer to the plant other
activities such as production, quality and tied up capital, and how can this effect ultimately influence company’s profit and
competitiveness?
In this paper, we discuss maintenance role in maintaining the quality of the essential elements contribute in the
manufacturing process such as production/operation and quality on the economic basis for achieving the competitive
advantages desired. Interactions between maintenance, production and quality, and how simple technical effects of
maintenance in the operative level can be transferred to the economic effect in the strategic level influencing company’s
profitability and competitiveness is discussed. A model describes the mechanisms through which vibration-based
maintenance (VBM) impact is transferred to the plant other activities and company’s business is developed and verified
using real and typical data based on the author’s experience in the Swedish paper mills.
The main result of this study is developing a model for converting vibration-based maintenance technical to financial
impact and assessing it. The model potential and applicability is tested using a combination of real and typical data. The
result also demonstrates how the potential of the VBM impact on the production, quality, tied up capital and different
relevant expenses can be assessed financially. Furthermore, the model can be utilised for two additional objectives; for
examining whether the investment done in maintenance is cost-effective or not, and simulating maintenance financial
impact on the relevant working areas in order to assess the investment required before selecting and applying the
improvement plan. The major conclusions are; applying the model, VBM policy can be introduced as a profit centre, and
identifying the transferring mechanisms of maintenance impact highlights where, why and how much should be invested in
order to enhance production and maintenance performance continuously and cost-effectively.
r 2006 Elsevier B.V. All rights reserved.

Keywords: Vibration-based maintenance; Maintenance impact transferring mechanisms; Maintenance savings; Costs and profits

Tel.: +46 470 708422; fax: +46 470 768540.

E-mail address: Basim.Al-Najjar@vxu.se.

0925-5273/$ - see front matter r 2006 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2006.09.005
 ARTICLE IN PRESS
B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
1. Introduction
The increasing competition in the market creates
a need to search new ways in which companies can
differentiate themselves and gain more profit and
better competitive position. Company’s internal
effectiveness is strongly influenced by the main-
tenance role and impact on other working areas
such as production, quality, production cost, work-
ing environment, amount of work in progress and
tied up capital. Mathew (2005) proposes an
approach for developing effective and practical
tools for optimisation of the maintenance function,
which are important for exploring maintenance
impact on the company’s business.
According to the available knowledge and
experience, the use of integrated vibration-
based maintenance (VBM) policy, i.e. where the
data from VBM policy can be integrated
with data from relevant working areas such as
production and quality, provides possibilities for
acquiring early indications of changes in the
component/equipment state and product quality,
Al-Najjar (2001).
Operating and environmental conditions such as
machine speed and load, operator, maintenance
quality and production method influence machine
life, Al-Najjar (2000a). Therefore, the assessment of
the machine’s condition and the impact of improve-
ments in maintenance effectiveness and accuracy on
the plant activities would be achieved effectively if
the information from relevant and nearly connected
working areas such as production, maintenance,
quality and accountancy were considered simulta-
neously, Al-Najjar (1997). Further, improvements
in machine productivity and performance, product
quality, etc. may, in many cases, be performed
effectively when considering the maintenance policy
involved, e.g. high vibration levels in the press and
drying cylinders of a paper machine can reduce
paper surface quality (Al-Najjar, 1997). Zhang
(2004) emphasises on the need for condition based
maintenance (CBM) modelling, which can support
maintenance decision making utilising measured
CM information, and reducing unnecessary main-
tenance.
In this paper, we highlight, discuss and model the
role of efficient maintenance in the enhancement of
the company’ internal effectiveness for achieving
better competitive advantages.
A wide range of relevant and high quality data is
necessary for mapping the situation with respect to
261
the technical, financial, environmental and manage-
rial aspects. But, achieving improvements in main-
tenance to maintain and improve the manufacturing
process performance cost-effectively demands
among others adequate answers of the following
questions:
1. How can the impact of the investments in
maintenance be transferred to maintenance
technical impact?
2. How can maintenance technical impact be
transferred to the nearly related working areas
such as production, quality and life cycle cost
(LCC) factors?
3. How can maintenance technical impact be
transferred to financial impact in the nearly
related working areas?
4. How can maintenance financial impact on the
nearly related working areas be quantified?
5. Where and how much is it beneficial to invest in
maintenance?
A particular database for a wider range of
information is required for effective maintenance
and better control of a machine’s condition,
Al-Najjar (1997). A common database is a
direct result of proper integration of the databases
of the plant operations for maximising company’s
profits, because it will ease the identification and
elimination of both quality deviations and failure
causes at an early stage, Al-Najjar (2002). For
example, the common database can be utilised to
distinguish the actual reasons behind damage
initiation and development if it is due to the
repair/replacement quality, operator’s misuse,
faulty design, harsh operational conditions or
replaced component quality, and to avoid their
recurrence.
Ljungberg (1998) reported that the overall
equipment effectiveness (OEE) in a Swedish
car factory is estimated on average about 55%.
This means that the company can increase its
production capacity without investing in new
machinery if it implements an efficient maintenance
policy, which allows enhancing availability
strongly, quality rate and performance efficiency
moderately.
OEE is a multiplication of equipment availability,
performance efficiency and quality rate, Nakajima
(1988). Thus, maintenance has a crucial role in
recovering a big part of the losses behind low OEE
especially those related to unavailability. In addition,
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262 B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
some of the production losses due to lower produc-
tion speed and bad quality that generated due
failures and technical faults can also be recovered
by more effective maintenance.
The problem addressed in this paper is, how does
maintenance technical impact transfer to the plant’s
other activities such as production, quality and tied
up capital, and how can this effect ultimately
influence company’s profit and competitiveness? In
Section 2 a survey of the publications concerning
the problem addressed in this study is reported. In
Section 3, maintaining the quality of the essential
elements contribute in the production process is
discussed. Also, the interactions between mainte-
nance on one side, and production and quality on
the other side are studied. The operative and
strategic level of activities at a plant is introduced
and discussed in Section 4. Cost-effectiveness due to
efficient maintenance is discussed and modelled in
Section 5. In Section 6, the mechanisms of
transferring maintenance technical impact to the
nearly related working areas at a plant and the
assessment of the financial impact generated based
on the maintenance technical effect is modelled and
discussed. An example describes the application of
the model using real and typical data from paper
mills is also presented.
2. Literature survey
A wide search in the international databases has
been performed. The databases have been consid-
ered in this survey were Emerald and Science Direct
December. In the Emerald database, the search is
carried out on the publications done until 2004
using several keywords, such as; economic main-
tenance impact, technical maintenance impact, links
for transferring maintenance impact. The same
keywords have been used in the search done in
Science Direct database but in three different
periods; 1999—present, 1986–1998 and prior to
1986.
From the search done in the Emerald and Science
Direct databases using the keyword maintenance
economic impact, we found four papers. Davis
(1991) discusses the process overcladding,
assessing economic and social factors, and the
various physical problems it can remedy. In
Akdeniz (2001), the damage tolerance concept, its
relation to airplane age and its evolution that is
fail-safe to damage tolerance based maintenance
certification for jet transport airplanes are dis-
cussed. The third paper is written by Al-Najjar
(2000a), the author of this paper. It treats the
impact of real-time measurements of operating
condition on effectiveness and accuracy of VBM
policy. Mitev and March (1998) discusses some of
the factors contributing to the risks small and
medium enterprises take when implementing infor-
mation technology were investigated in a question-
naire survey of 18 small businesses in the Great
Manchester area. But, these papers did not address
the mechanisms of transferring the technical impact
generated by maintenance to financial results at the
plant strategic level.
The search in Emerald and Science Direct using
the other keywords; maintenance technical impact,
and link of transferring maintenance impact have
not resulted in any publication.
A previous literature survey was made during
2001, see Al-Najjar and Alsyouf (2003), using the
databases Emerald, ABI/Inform, and Applied
Science and Technology Index. The search was
done on different combinations of keywords such as
maintenance costs, maintenance savings and main-
tenance profit. It was found that many researchers
have been talking about the savings, gains or profits
that could be gained when implementing more
efficient maintenance approach, see among others
Ahlmann (1984, 1998), Maggard and Rhyne (1992),
Foelkel (1998), Coetzee (1999), Walsh (1999), Miller
(2000), Ralph (2000), Carter (2001), Kutucuoglu
et al. (2001), and Swanson (2001). But nothing has
been studied about how to assess these cost factors
and how the technical impact has been transferred
and converted to financial impact. Also, nothing
about where to find the information parameters
required for these assessments in the available
accountancy systems.
From everyday experience, when failures occur, it
is often easy to show that a lack of or inefficient
maintenance was responsible. But, when the
production is running smoothly without remarkable
disturbances, it is not easy to realise that is
thanks to performing efficient maintenance,
see Al-Najjar (2000a), Al-Najjar et al. (2001),
and Waeyenbergh and Pintelon (2002). This is
why it is important to identify and assess the impact
of the maintenance function on the relevant work-
ing areas such as production, quality, production
logistics, redundancy of spare parts in the storage,
tied up capital, etc., and to clarify how the technical
impact is transferred and converted to the financial
terms.
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3. Maintaining the quality of the essential elements
contribute in production
In this study, the following factors are considered
significant contributors in creating and maintaining
company’s competitiveness for surviving the hard
international competition:
1. high quality product/service;
2. production of items at a competitive price
through applying continuous cost-effective im-
provement and approaching high OEE;
3. delivery on time;
4. environmental friendly production;
5. society acceptance.
Higher quality production (with narrower varia-
tion) at a competitive price that can be delivered on
time (with a negligible or very small marginal of
delay) and low environment pollution have crucial
impact on customer satisfaction, gaining market
shares, society acceptance, company’s profitability
and competitiveness. By examining the debate on
markets and resources, we can realise that there are
two perspectives of creation and enhancing compe-
titiveness. These are outside-in, i.e. using the
external factors, such as emerging of companies,
partnership and market structure, and inside out,
i.e. better usage of the internal factors, such as
company’s unique resources, competence and dif-
ferentiation, see for example Porter (1985) and
Barney (1991).
Regardless of which perspective, i.e. outside-in or
inside-out, is adopted by the company’s manage-
ment, the company should utilise its valuable and
rare resources efficiently and effectively to achieve
the long-term high profitability. This demands
dealing with company’s problems related to the
internal efficiency, effectiveness and productivity,
Al-Najjar (2003). In other words, it is significant to
focus on the interactions and integration of the
relevant and essential disciplines (working areas)
such as production, quality, personnel competence,
maintenance, LCC management and analysis and
their synergic effects.
Collacott (1977), Al-Najjar (1997, 1998) and
DeBotton et al. (2000) highlight the reliable
possibilities offered by applying VBM in detecting
deviations in the condition of rotating machines at
an early stage. Furthermore, these indications can
be of great importance in the early detection of
deviations in product quality and therefore in
263
identifying problems before they show on quality
control charts, as discussed by Al-Najjar (1997,
2001) and Olney and Swanson (2002). Applying
effective maintenance aims to enhance company’s
profitability and competitiveness through continu-
ous cost-effective improvement of production pro-
cess efficiency, effectiveness and productivity, which
can be achieved via maintaining and improving the
quality of all the elements contribute in the
production process continuously and cost-effec-
tively.
The role of effective maintenance is defined in this
paper as: a means for detecting and controlling the
deviations in the condition of a production process,
such as damage causes and initiation, damage
developing mechanisms and potential failures,
production costs, working environment and pro-
duct quality in order to interfere when it is possible
to arrest or reduce equipment/component deteriora-
tion rate before the process condition and product
characteristics are intolerably affected and to per-
form the required action to restore the equipment/
process or a particular part of it to as good as new.
All these should be performed at a continuously
reducing cost per unit of good quality product.
3.1. Interactions between quality, production and
maintenance
Changes in any working area such as production,
quality or maintenance influence the other closely
related working areas due to their internal interac-
tions, Al-Najjar (2002). Product quality, production
cost, machine condition and its life length are
usually influenced by the quality of the input
elements in the production process, such as raw
material, production tools, methods and proce-
dures, operating and maintenance staff competence
and operating conditions, and not just by the type
of production machinery and maintenance policy.
Bad raw material or not well-trained operating staff
in many cases lay behind initiation (or development)
of damage in the component/equipment or cutting
tool, which in turns results into production/financial
losses, Al-Najjar (1997). The quality of the essential
elements contribute in the production is a key factor
influencing the OEE. Negligence of maintenance
and its role in the production process allows rapid
degradation of machine and product quality,
because as it is known that a process/machine in
bad condition cannot, in general, be expected to be
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264 B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
capable of mass-producing items of high quality at a
competitive price and delivered on time.
An effective maintenance is responsible of main-
taining the quality of the elements contribute in the
production process, but it still not occupying its real
status in the company’s culture yet, because among
others, there is a shortage of the researches high-
lighting maintenance impact on the company’s
business. This shortage is due to many causes
such as:
1. Maintenance has, in general, been considered as
a cost- and not profit centre.
2. Maintenance has complex interactions with (and
impact on) other working areas such as produc-
tion, quality, personnel competence, operating
environment and LCC management. Therefore,
it is not an easy task to identify, quantify and
follow up maintenance impact on the company’s
business.
A machine that is not well maintained often fails
and suffers of speed losses and lack of precision,
which in turn results in a partial reduction of the
personnel effectiveness and working moral. Asso-
ciated with failures, machine often produces defec-
tive items, Ahlmann (1998) and Al-Najjar and
Alsyouf (2004). Producing defective items combined
with delivery delay due to production disturbances
increases production cost, reduces profit and
increases the risk of losing market shares, which
endangers the survival of the organisation in the
long term. Reducing production losses and enhan-
cing product quality always yield more profit and
improvement in the company’s competitiveness,
Al-Najjar and Alsyouf (2003).
Production responsible of making goods, but an
efficient maintenance policy influences the capacity
of production and capability of the machine.
Production personnel technical competence con-
cerning machine construction and function influ-
ences production and maintenance costs, and
machine performance efficiency because this com-
petence influences the way of operating and main-
taining the machine. Mckone and Weiss (1998) cited
that the amount of money spent company-wide on
maintenance by Du Pont in 1991 was roughly equal
to its net income.
In general, maintenance role has not been high-
lighted effectively because, the major part of the
profit that an effective maintenance generates
demands a big amount of effort to assess, but it is
often easier to only measure maintenance costs,
Al-Najjar and Alsyouf (2004).
4. Interactions between the operative and strategic
levels’ activities
The activities performed at a producing company,
does not matter whether it produces goods or
services, can roughly be divided into two categories
that are performed at two levels; operative and
strategic levels. In this section the interactions
between the activities performed at the operative
and strategic level are discussed.
4.1. Operative level
See Fig. 1, the planning, performance, control,
improvement, interactions and integration of the
core-activities of the plant working areas such as
production, quality, maintenance, production logis-
tics and LCC management and analysis, and their
results are mainly considered. At this level, we can
easily recognise that the condition of the machines
and maintenance performance quality affect the
product and machine quality, because well-main-
tained equipment acquire higher reliability and
effectiveness. On the other hand bad quality (or
lack of) maintenance has appreciable negative
financial consequences due to its technical impact
on machinery, product quality, delivery schedule,
production cost factors and customer satisfaction,
Al-Najjar (2002). Products of bad quality influence
company’s reputation and generate additional cost
due to, among others, warranties. Selection of the
most cost-effective maintenance strategy and policy
affects the mean effective life length of the equip-
ment and its failure patterns, which in turn affects
production, quality, time of delivery, production
cost (and product price) and consequently customer
satisfaction, see the competitive advantages in
Section 3. Rao (1993) claims that savings of up to
20% on total energy consumption in the UK could
be achieved by employing efficient monitoring and
management strategies. Both, the production pro-
cess and quality of the maintenance work affect
equipment condition, which in turn affects final
product quality (technical specifications).
4.2. The strategic level
We mean that all the activities related to
developing, performing and following company’s
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B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273 265

Market, customer, competitors, suppliers

Profit generating factors (Operative level) Factors for Creation competitiveness
Overall equipment
High quality product/
effectiveness (OEE) service
Inside-out Product at a competitive
price
Availability Performance efficiency Quality rate Delivery on time Profitability
Environmental friendly
production
Society acceptance

Production system 1.1.1.1.1 Operative level Outside -in

Operation
LCC
Competence Maintenance policy
Maintenance Performance quality
Cost-effective continuous Profit generating factors (strategic)
Quality system Production logistic
improvement
Emerging
Collaboration
Organisation
Strategic level
Innovations
New producing technology
New product
Strategies at Production Quality Business Maintenance Better economic control
other working strategy strategy management strategy Integrating companies'
areas strategy business
Partnership
Market structure
Company strategy Etc

Fig. 1. A model describes qualitatively the roles of operative and strategic level activities in building company’s competitiveness.

strategy, which in turn, however, is translated into
the strategies of all the working areas considered in
the plant such as maintenance, production and
quality in order to achieve company’s technical and
financial objectives. The latter objectives cannot be
achieved without effectively fulfilling the strategies
of the related working areas. This is why it is
necessary to effectively integrate maintenance strat-
egy with the strategies of other working areas. The
impact of maintenance strategy can be realised
through implementing well-selected maintenance
strategy (and consequently policy) for maintaining
the quality of all essential elements which contribute
in the production process necessary for fulfilling
company’s objectives.
Maintenance deals with the internal operative
part of the process for creating company’s competi-
tiveness, i.e. it can, however, be classified as the
means for applying inside-out perspective. This is
because it is simply trying to create and enhance
company’s competitiveness with respect to the
company’s internal resources, assets and potentials,
see Fig. 1.
Researchers who are adopting the outside-in
perspective try to achieve, approximately, the same
results, but with respect to other factors that lay in
the strategic level through focusing on organisa-
tional structure, relationships between companies,
emerging or integrating companies’ business, part-
nership, market structure, etc. These factors are also
of interest for improving company’s competitiveness
and profitability, but with respect to a different
perspective. This means that these two perspectives
are complementary elements for creating and
enhancing competitiveness, but at two different
levels.
In many cases, the activities at these two levels are
unrealistically assumed completely isolated from
each other. But, we claim that company’s competi-
tiveness and profitability can be influenced and
improved from different directions simultaneously.
In Figs. 1–3, a reasonable, innovative and reliable
model is developed and verified in real environments
to describe the role of the inside-out perspective on
the creation of and maintaining company’s compe-
titiveness.
5. Cost-effectiveness with respect to maintenance
Maintenance strategies, methodologies and philo-
sophies such as breakdown, preventive maintenance,
condition-based maintenance, reliability-centred
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266 B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
maintenance and total productive maintenance use
different sources of data in their decision making
processes, see Al-Najjar (1997, 2000b), Moubray
(1991), Andersson and Rasmussen (1999), Martorell
et al. (1999), Wang and Hayfield (1999) and Al-
Najjar and Alsyouf (2003). These data sources can
be failure data, practical experience, technical
analysis results, condition-monitoring measure-
ments, operating data and data from surroundings,
or any combination of these data resources. The
most relevant, accurate and better data coverage the
more probable that the maintenance actions can be
performed in the right time preventing failures,
which in turn means the more efficient maintenance
policy, Al-Najjar and Alsyouf (2003). In other
words, the data collected should enable linking the
operative and strategic levels’ activities and results
clearly and easily for highlighting maintenance
impact on company’s business.
The major benefit of the output of improvements
in maintenance is usually noticed at the other
working areas such as production, quality, tied up
capital, LCC management, etc, but hardly in
maintenance as long as it shows more costs.
Identifying and relating the benefits generated, e.g.
by more efficient VBM is not the easiest task to do if
the mechanisms of transferring maintenance impact
is not well identified, and if the technical and
economic performance measures of the manufactur-
ing process were not identified and monitored
properly.
In general, improvements in the performance of a
maintenance policy aim to reduce production cost
and increase company’s profit and competitiveness
through enhancing process availability, perfor-
mance efficiency and quality rate. In order to justify
investments in maintenance, the cost-effectiveness
(Ce) of each investment (and consequently the
improvement generated) can be examined by using
the proportion of the difference between the average
cost per unit time before (Bb), and that after the
improvement (Ba), to the Bb, i.e.
Ba
Ce ¼ 1  . (1)
Bb
This means that all the savings (and may be
increments) in the expenses of production, tied up
capital, assurance premium, etc. including main-
tenance cost achieved by more efficient maintenance
policy should be counted, for more details about
these cost factors see Al-Najjar and Alsyouf (2004).
At the beginning it can be that CeX0, i.e. BbXBa,
due to the extra expenses incurred by the learning
period. This period can be defined based on the
nature of each improvement. But beyond this
learning period Ce should be bigger than zero, i.e.
Bb 4Ba in order to consider the improvement as a
cost-effective action. The ideal case yields,
C e ¼ 1. (2)
In other words it means that Ba ¼ 0, which is more
or less impossible, because there should always be
some costs that are greater than zero. Ce indicates
the reduction percentage in the total cost due
maintenance impact, thus it can be used as a
measure of the cost-effectiveness of the improve-
ments.
The cost-effectiveness (Ce) of investments in
maintenance is a general model for judging the
cost-effectiveness of the maintenance technique
implemented and justifying the investments done.
It is, in principle, applicable for all maintenance
techniques.
In Section 6, a general model describes and
quantifies the financial impact of maintenance,
independent of the maintenance technique being
used, is developed. An example quantifies the
financial impact of VBM on company’s business
for testing the model using a combination of real
and typical data is also introduced.
6. Model describes and quantifies the impact of
maintenance
In the operative level there are many working
areas, such as production, management, mainte-
nance, personnel and competence development,
working environment and quality, which demand
additional investments for enhancing the technical
results and consequently financial benefits at the
strategic level. In this study, only maintenance
technical impact and the mechanism transfer it to
the strategic level is illustrated, modelled and
discussed. This means that when considering addi-
tional working areas, equivalent descriptions of
their transferring mechanisms are required.
In many cases, plant value-adding activities are
monitored by technical measures such as OEE, i.e.
monitoring availability, performance efficiency and
quality rate. If the behaviour of OEE is monitored
in conjunction with total production cost and
production process profits, the company can also
assess how to reduce the production cost while
still satisfying customers, shareholders and society,
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B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
and consequently increase sales and market share,
Al-Najjar et al. (2004).
In order to survive rough competition, companies
need to improve their manufacturing and main-
tenance processes and profitability continuously.
Cost-effective continuous improvement in produc-
tion and maintenance performance demands first of
all effective tools for monitoring and analysing
technical and economic data, and identification of
the mechanisms converting the investments in
maintenance into technical actions—and back to
economic terms. Quantification of the impact of
investments in maintenance on the company’s
business enables the user to achieve reasonable
optimisation (and sub-optimisations) and reliable
decision-making procedures.
6.1. Model development and description
The mechanisms of transferring the impact of
improvements in (or of efficient) maintenance policy
to the plant other activities are qualitatively
illustrated in Fig. 2. Quantifying of maintenance
impact that is transferred to plant activities is
discussed in Section 6.2.
The transferring mechanisms of maintenance
impact are divided into five parallel lanes equivalent
Fig. 2. Mechanisms of maintenance impact on the plant other activities.
267
to the possible investment areas for enhancing
maintenance. Each lane represents a particular
chain of links through which the investment in
maintenance is logically converted from finance
(investment) to technical to finance and finally to
market terms. At the start of each chain, the
investment is allocated to a particular improvement
area that is denoted by ðÞ. Every investment aims
to achieve specific enhancement in the maintenance
policy being used. In this paper, we focus on the
areas when a big potential of enhancing main-
tenance policy is possible, such as to achieve:
1. Better use of the available maintenance technol-
ogies through offering better training to improve
personnel knowledge, experience and compe-
tence. This is because, among other causes CMs
systems are, in general, not reliably, effectively
and fully utilised, such as the case when applying
RCM, TPM and partly CBM see Al-Najjar et al.
(2001).
2. Better prediction of the time to maintenance
action, which can be achieved by better fault
identification and localisation, and modelling of
time to failure, Al-Najjar and Wang (2001).
3. Better diagnostic techniques, e.g. utilising edge
CM technology, Al-Najjar (1998, 2000a,b, 2001).
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268 B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
4. Less failure related accidents. When maintenance
is applied for monitoring and eliminating the
causes behind deviations in the quality of the
essential elements contribute in the production
process, such as personnel, machine and environ-
ment it would lead to reduce the risk of failure
related accidents.
5. Higher faith in the maintenance system, which is
usually developed based on successful applica-
tions.
The technical and financial impact done by every
investment area is denoted by special bullet in a
particular lane denoting the impact of the invest-
ment area that has a similar bullet. The links
through which the impact is transferred are all the
columns following the fifth investment area (Higher
faith in maintenance system). The links starts and
ends by columns entitled by (Less failures) and
(Higher stake value), respectively. The last two
columns in the model, see Fig. 2, are for specifying
where the data required for quantifying the impact
of maintenance technically, such as failures and
defective items, and financially, such as maintenance
savings and economic losses, can be found.
Furthermore, some of the impact transferred to
the strategic level is generated by the impact of
several mechanisms (lanes). This is why some
columns in Fig. 2 include bullets belongs to different
mechanisms.
From everyday experience, reliable maintenance
actions such as lubrication, tightening lose screws,
cleaning, replacement of deteriorated components,
adjustments, repair, etc. reduce the probability of
damage initiation in the machine. Better diagnosis
and prognosis result in shortened time of (and
reduce cost of) repair, adjustment and other
maintenance actions and consequently leads to
longer production time and lower production cost.
For example solving the problem of high vibration
level due to resonance enables the operator to
increase machine production speed to its maximum
capacity.
Also, cyclic improvements of the maintenance
policy utilising available knowledge, experience and
machine’s database, Al-Najjar (1998), influence the
costs incurred by production, maintenance, tied up
capital and other expenses, such as insurance and
compensations for accidents, Al-Najjar et al. (2001).
The possibility of detecting damage causes and
initiation, following damage development, better
estimation of the time to action and detection of
deviations in the product quality at an early stage
yields better chance of failure prevention, less
maintenance actions and low vibration level and
in turn leads to longer production time, less
maintenance and production costs and better
product quality.
For example detecting high operating or ambient
temperature, which reduces lubricant viscosity and
results in rapid wear, helps to avoid damage
initiation and reduce financial losses. Keeping the
machine operating at high quality through main-
taining its technical specifications (quality) reduces
operating costs.
When failures and other unplanned stoppages
and production of bad quality are reduced, the
capital tied up in the buffer between production
stations and final production storage can conse-
quently be reduced. Prolonging the mean effective
life length of component/equipment means a direct
reduction in the number of condition-based replace-
ment (CBR) and failures. Therefore, the machine
availability increases and the production losses
decrease. Less CBR and failures reduces the number
of spare parts consumed, which leads to smaller
spare part storage and less storage cost. Fewer
failures lead to increase the faith in the CM system
and maintenance policy. This would result in
additional reduction in the redundancies of spare
parts, equipment and personnel, i.e. less capital tied
in the spare part storage.
A better working environment can be achieved by
more efficient maintenance through reducing vibra-
tion, noise and pollution in the working environ-
ment, which in turn improves operator’s moral and
consequently leads to more production and better
product quality.
Lower vibration level results into lower energy
losses, because the generated vibration energy due
deterioration is a lost energy, which in turn leads to
less energy consumption, i.e. less operating cost, and
consequently better global environment.
When using VBM, more accurate diagnosis and
prognosis, and lower vibration level are direct
results of better vibration spectral analysis, which
can be improved continuously using cyclic improve-
ment of VBM policy, Al-Najjar (1998). Using the
most informative CM parameters and system, it is
possible to control equipment condition and pro-
duct quality, and to reduce equipment vibration
level. Using integrated VBM on the basis of the
maintenance role presented in Section 3, provides
well documented observations and evidences would
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B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
allow the user to convince the manufacturer to
modify the next generation of the machine accord-
ing to the user’s inquiries, Al-Najjar (1997, 2002).
6.2. Example; quantifying VBM financial impact
and results analysis
In this Section, we investigate the possibility of
quantifying VBM economic impact on the produc-
tion costs of a paper mill machine through
considering the impact of only one investment area
(Better use of the available maintenance technolo-
gies), i.e. one lane of the model described in Fig. 2.
From this lane we focus on just nine links (columns
or call it savings accounts), which is started by the
saving account/column less failures per year and
finished by the saving account less delivery delay
penalties. We select the saving accounts that have
the major impact on the company’s business, such
as the first three columns, which constitute avail-
ability, and the quality rate, see Fig. 3. Some of the
expenses, i.e. the last five saving accounts/columns,
that have interesting impact and can be found easily
in the company’s database are also included.
The main aim of the investments in training
programs is to enhance maintenance personnel
ability in utilising the available techniques and
tools, such as CM tools and systems for analysis
Fig. 3. Example describes qualitative and quantitative maintenance impact on the plant activities (during one year).
269
and diagnosis. The better use of these systems and
tools the bigger chance of avoiding failures and
other disturbances, which in turn prolongs produc-
tion time, increases production and improves
quality. Other expenses, such as those related to
environment and personnel damage, insurance
premium, tied up capital in unnecessary redundan-
cies of spare parts and equipment and delivery delay
can consequently be reduced.
The number of the saving accounts can be
different for different companies and branches.
The shares of these accounts in the total savings
can also be different. For example paper mills
producing paper especially for newspapers
usually have moderate production losses due to
bad paper quality that is generated because of
inefficient (or lack of) maintenance, Al-Najjar and
Alsyouf (2004).
When quantifying the saving accounts in the model
shown in Fig. 2, the investment areas may have internal
interactions that influence their impacts. In this primary
phase of application, the impact of just one investment
area is considered, and the interactions between
investment areas are neglected. Furthermore, we ignore
the improvement that cannot easily be quantified,
because it demands special investigation. For
example, we neglect the effect of the enhancement in
the working environment achieved by applying more
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270 B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
effective maintenance, which improves operating and
environmental conditions through reducing the levels
of vibration, noise, temperature and pollution in the
surrounding. These enhancements influence the work-
ing moral positively and usually result into more and
better production quality. But, it is not easy to quantify
it in terms of production units or in SEK without
special investigation, which is outside the scope of this
paper. For the same reasons, it is difficult to quantify
how the customer satisfaction influences the market
share of a company. In general, a bigger market share
is a result of acquiring better reputation and sells more
goods or services, which are direct results of, among
other factors, maintaining and enhancing the compe-
titive advantages. Higher stake value can contribute in
generating higher financial resources for the company,
but its effect on the company’s profitability is also
outside the scope of this paper.
Some of the saving accounts (columns) men-
tioned in Fig. 2 such as availability, performance
efficiency and more savings are eliminated in this
application, because their values are described in
other variables. For example, the availability is per
definition increased when all different unplanned
stoppages are reduced and performance efficiency
can be expressed by more production in time see
Fig. 3. Also, the saving account called more savings
shown in Fig. 2 is the direct sum of all the savings
that have been done annually in all the links/
accounts of the transferring mechanism.
6.2.1. Formulas for assessing of the impact of
maintenance
Simple mathematical formulas to assess the
financial impact of maintenance (savings) at each
of the above-mentioned saving accounts, i.e. to
assess the savings achieved due to better usage of
the available maintenance technologies, are devel-
oped below. These formulas can be applied inde-
pendent of the maintenance technique being used.
Denote the saving at any of these nine saving
accounts by Si , for i ¼ 1; . . . ; 9. The total savings
can simply be expressed as
X
i¼9
Total saving ¼ Si .
i¼1
The saving accounts, i.e. S 1 ; S 2 ; . . . ; S 9 , presented in
Fig. 3 are assessed using the following formulas:
1. Less failures: the saving in the production cost
has been achieved due to less failure (S1) can be
expressed by
S 1 ¼ Number of failures avoided  average
stoppage time  production rate  profit
margin ðPM Þ,
S 1 ¼ ½ðY  yÞ  L1   Pr  PM , (4)
where Y and y are the numbers of failures during
the previous and current year, respectively, L1 is
the failure average stoppage time and Pr is the
production rate of high quality production.
2. Shorter average stoppage time: the saving that
has been achieved due to shorter stoppages (S2),
i.e. longer production time, is expressed as
S 2 ¼ Difference in failure average stoppage
time  number of failures  production
rate  profit margin,
S 2 ¼ ½ðL1  l 1 Þ  y  Pr  PM , (5)
where L1 and l1 are failure average stoppage
times during the pervious and current year,
respectively.
3. Less short stoppages; the saving in the produc-
tion cost has been achieved by less short
stoppages (S3) can be expressed by
S 3 ¼ ½Previous year short stoppages ðBÞ
current year short stoppages ðbÞ  average
stoppage time ðL2 Þ  production rate  profit
margin.
S 3 ¼ ½ðB  bÞ  L2   Pr  PM . (6)
4. Higher quality production: the saving achieved
due to higher production quality (S4) is expressed
by
S 4 ¼ ½Current year high quality production
per hours  Previous year high quality
production per hour  24 h  360 days
 profit margin,
(3)
S 4 ¼ ðp  PÞ  24  360  PM , (7)
where P and p are tons of high quality paper
produced per hour in the previous and current
year, respectively.
5. Less expenses paid by the company to cover,
for instant, personnel compensation due to
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accidents, environmental damage penalty, insur-
ance premium, direct maintenance costs (that
includes labour, spare parts and overheads), tied
up capital in spare parts and equipment and
penalty expenses of delivery delay. Denote the
expenses before and after the improvement, i.e.
previous and current year, by Eb and Ea,
respectively. Then, the sum of the reduction or
increment in these expenses can be expressed by
X five failures less, 50 less short stoppages, 1 h shorter
ðE b  E a Þj ; (8)
j
where j ¼ 1; 2; 3; 4; 5 denotes five types of the
expenses that are incurred by the paper mill
machine considered in this paper, see above.
By substituting (4)–(8) in Eq. (3) yields
Total saving
¼ PM  fPr  ½ðY  yÞ  L1 þ ðL1  l 1 Þ  y
þ ðB  bÞ  L2  þ ðp  PÞ  24  360g
X
5 rate and finally less short stoppages. The reason
þ ðE b  E a Þ:
j¼1
In this example, the model is applied using
partly real data, such as the profit margin,
production rate and production losses due to bad
paper quality, and partly typical data, such as the
numbers of failures, average stoppage times and
short stoppages, based on the author practical
experience in paper mills to describe the model’s
applicability and potential, see Al-Najjar et al.
(2001).
In order to determine the profit margin, we
need to subtract all the cost (fixed and variable)
from the turnover. Companies have usually an
approximate final figure of the profit margin
assessed per ton, which is the case in paper
mills, hour or item. For simplicity, all the assess-
ments done in Fig. 3, the profit margin per
ton of high quality production (PM) is assumed
1800 SEK. The data required for performing these
assessments are classified in Fig. 3 into three
categories based on where these data can found in
the company’s databases. These data can either be
found in the machine operating database or/and in
other databases, such as quality and accountancy,
or the data should be estimated based on some
available information in consultation with the
company’s personnel.
271
In this example we assume that the numbers of
failures and short stoppages, average stoppage time
required to restore the machine and the rate of
production of high quality products to be 20 failures,
400 short stoppages, 6 h and 23.45 ton high quality
production, respectively. The changes in these vari-
ables, i.e. reductions or increments, that have been
achieved when VBM systems and tools are better used
during a period of time of one year are assumed to be
average stoppage time and more 0.1 ton high quality
production per hour. The average of the production
rate of high quality production during the year of
assessment is 23.5 ton.
Applying the formulas developed above in this
example, the major result that can be highlighted is
that the total saving (3 885 091 SEK) accumulated
from nine different accounts by which maintenance
technical impact is converted to financial. The
saving accounts of the biggest results are those
representing the savings generated due to less
failure, shorter stoppages, better production quality
ð9Þ behind that is the high profit margin per one-ton
high quality production, which is, in general, the
case in paper mills.
The losses in production due to bad quality are,
sometimes, generated by technical problems, which
could be avoided by more efficient maintenance and
better usage of maintenance techniques. The cost
incurred in this saving account is assessed assuming
that the defective amount of paper produced is
recycled, i.e. we loss just the profit margin, which is
the case in paper mills.
The sum of the three saving accounts constituting
availability, i.e. failures, short stoppages and failure
average stoppage time, is 2 079 891 SEK and
represents about 54% of the total savings. In
general, maintenance major impact is on the
number of stoppages and average stoppage time.
The lowest saving is achieved due to less short
stoppages, because we preferred to be conservative
in our assumption, but much more saving is possible
to be done, see Al-Najjar and Alsyouf (2004). The
same thing can be said about P the saving achieved in
the last five accounts, i.e. 5j¼1 ðE b  E a Þ.
7. Conclusions
The model applied in Fig. 3 can be used to assess
the real savings have been achieved by applying
more efficient maintenance, and also can be used to
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272 B. Al-Najjar / Int. J. Production Economics 107 (2007) 260–273
anticipate the potential savings that can be achieved
when investing for achieving better utilisation of
maintenance techniques. The latter can be done
when the knowledge and experience required to
decide how maintenance techniques can be utilised
for enhancing the production and maintenance
processes performance, i.e. the knowledge and
experience required to identify and eliminated the
root causes behind production losses, disturbances,
higher production cost and inefficient maintenance.
The model in Fig. 1 describes schematically the
interactions between maintenance and competitive
advantages, and maintenance role in creating and
enhancing company’s competitiveness based on
company’s internal resources. Fig. 2 illustrates
qualitatively how the impact of more efficient
maintenance policy can be transferred from main-
tenance working area to the other disciplines within
the plant. The impact is, in principle, transferred to
disciplines independent if they are closely related to
maintenance or not. Also, this imply that the
maintenance impact does not restricted to the
technical area, such as more production, safer
operation and better quality rather than it influences
other essential attributes of a production process
such as personnel competence, environment and
assurance premium.
Applying the model described in Fig. 2, it will be
possible to capture the most dominating factors
controlling cost and profits factors when consider-
ing maintenance as a profit centre. Also, it can be
used to describe, motivate and monitor mainte-
nance behaviour and economic importance and role
in the company’s business. The possible payback of
the investments in VBM according to the Swedish
and the international scale is about 5 to 10 times the
investment, Al-Najjar and Alsyouf (2004). This
means that the investment in this example can be
assessed to be about 800 000–400 000 SEK, respec-
tively. Furthermore, The model can be utilised for
two additional objective; the first is to examine
whether the investment done in maintenance is cost-
effective or not, and the second is for simulating
maintenance financial impact on the relevant work-
ing areas in order to assess the investment required
before performing the improvements.
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